Monday, April 13, 2009

Goldman Sachs (GS) Pre-Announces 14 Hours Early

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This is quite amusing; Goldman Sachs (GS) was so excited that they have been able to swindle errr, been able to game the system err, have run their business with flawless execution (ex asking the government to change them into a bank holding company, pay in full their AIG exposure, benefit from FASB changes, and receive TARP money) that they could not even wait until tomorrow morning to announce.

Of course they beat by a massive amount which was a (ahem) surprise. They also smartly are offering $5 Billion worth of shares now that their shares have nearly doubled in a month. Now I do believe that the terms Warren Buffet gave to Goldman Sachs are more onerous than the generous government subsidy [Sep 23, 2008: Warren Buffet Finally Decides to Start Buying Distressed Assets] - so in theory it would make more sense to pay back Buffet first. Ah ... but then the management compensation structure would still be at risk, so let's pay off the least expensive debt first. Sort of like paying off your 5% credit card before your 19% credit card... makes no sense to the entity but plenty of sense to the management.

So thank you taxpayer for supporting us in time of need; thanks for the AIG money; but now that you threaten our bonuses we are going to get this money right back to you and away we go - business as usual. In the meantime 1 of the 4 major competitors went bankrupt, and 2 others were forced to merge under duress. Our plan is working perfectly. It's Goldman Sachs world; we just live in it.

Riddle me this, somehow Goldman Sachs (GS) was able to post earnings higher than a year ago when capital markets were much healthier and there was at least "some" business going on"? (pre Bear Stearns implosion). But I suppose with black box accounting in financials, we really never know what is going on - and that is basically how we got here. Solution to lack of transparency that breeds distrust, runs on banks, and government saviors? More of the same.

EPS of $3.39 v $1.64
  • The Goldman Sachs Group, Inc. (NYSE: GS - News) today reported net revenues of $9.43 billion and net earnings of $1.81 billion for its first quarter ended March 27, 2009. Diluted earnings per common share were $3.39 compared with $3.23 for the first quarter ended February 29, 2008.
  • Net revenues in Investment Banking were $823 million, 30% lower than the first quarter of 2008 and 20% lower than the fourth quarter of 2008.
  • Net revenues in Trading and Principal Investments were $7.15 billion, compared with net revenues of $5.12 billion for the first quarter of 2008 and negative net revenues of $4.36 billion for the fourth quarter of 2008. (that's where the growth came from) Net revenues in FICC were $6.56 billion, more than double the amount in the first quarter of 2008. These results reflected particularly strong performance in interest rate products, commodities and credit products, as FICC operated in a generally favorable environment characterized by client-driven activity, particularly in more liquid products, and high levels of volatility.
  • Net revenues in Equities were $2.00 billion, 20% lower than the first quarter of 2008. Net revenues in the shares business were lower compared with the first quarter of 2008 due to lower commissions, primarily reflecting lower levels of activity outside of the U.S
  • Net revenues in Asset Management and Securities Services were $1.45 billion, 29% lower than the first quarter of 2008 and 17% lower than the fourth quarter of 2008.

$5 Billion Offering
  • The Goldman Sachs Group, Inc. (NYSE: GS - News) announced today that it has commenced a public offering of $5 billion of its common stock for sale to the public. Goldman, Sachs & Co. will serve as the sole underwriter for the transaction.
  • After the completion of the stress assessment, if permitted by our supervisors and if supported by the results of the stress assessment, Goldman Sachs would like to use the capital raised plus additional resources to redeem all of the TARP capital.
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